medium · Frm Part 2 Risk & Investment Management
A portfolio optimizer returns a suggested 15% short position in Utilities to hedge a large long position in Industrials. The analyst notices the Marginal VaR of the Utilities position is negative.
If the analyst doubles the short position to 30%, will the Marginal VaR necessarily remain the same?
- Yes, because Marginal VaR is a constant property of the asset class.
- Yes, provided the correlations between the two sectors remain stable.
- No, because the portfolio beta and total volatility will change as the composition shifts.
- No, because Marginal VaR is always zero for any short position used as a hedge.
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